McKay Securities swings to loss amid market uncertainty

London and South East-focused real estate investment trust McKay Securities announced its half year results for the six months to 30 September on Tuesday, with adjusted profit before tax up 11.8% to £4.42m compared to the same period last year.

The company’s gross rental income was up 2.4% to £10.42m, while EPRA earnings per share were 10.3% firmer at 4.3p.

McKay posted an IFRS loss before tax of £3.78m, swinging from a £34.59m profit a year ago, with EPRA net asset value down 2% from the beginning of the period at 295p per share.

The board reported a loan-to-value ratio of 31.4%, up from 28.9% at the start of the year.

It also declared an interim dividend of 2.7p per share, in line with the previous interim dividend.

“Delivery of our growth strategy remains on programme, with encouraging progress over the period crystallising and consolidating the significant income potential within our existing portfolio,” said CEO Simon Perkins.

“With our proactive portfolio management, contracted rental income has increased by 6.4% to £22.45m pa and the full potential rental value of the portfolio has increased by 2.4% to £32.76m pa.”

Perkins said there remained significant potential in the portfolio, which was close to fruition with the completion of McKay’s development schemes in Reading and Redhill.

“Release of the full 44% portfolio reversion of £9.77m pa would take our portfolio yield from 5.1% to 7.3% at current values.”

The property market generally suffered a loss of confidence following the EU referendum result, Perkins explained, but he said the board has more recently seen markets stabilise, with improved recognition of the attraction of property as an asset class in its core markets.

“The South East office occupier market remains governed by positive fundamentals, with low levels of supply of Grade A quality space and a limited development pipeline.

“Yet occupiers are increasingly facing building obsolescence issues that will continue to underpin demand and new requirements.”

Perkins said McKay remained well financed and has the ability to generate growth from the busy programme of development and refurbishment projects and management initiatives within its existing portfolio.

“The world is a more uncertain place than it was a few years ago, but despite this, McKay is in good shape to continue to deliver value for our shareholders.”